Executive Summary of a Few Key Clauses of Panama Law No. 5

Panama Law No. 5 (PL-5) is a state contract whereby the Republic of Panama gives the Panama Ports Company (PPC) complete control over two strategic port facilities at each end of the Canal, Cristobal on the Atlantic and Balboa on the Pacific. The length of this “lease” is for 25 years with an automatic additional 25-year option. (See Preamble and clauses 2.1, 2.2 and 2.9.)

In return, Panama received 10 percent of PPC’s stock and, subject to various contingencies, $22.2 million per year. (See clauses 2.3 and 2.4.) Panama also agreed to give PPC a 15-year option that permits the company to develop the facilities and installations of Diablo and Telfers islands, thus considerably increasing PPC’s influence over the Canal beyond the two ports. (Clause 2.1.) PPC also has the right to utilize the Air Station Albrook area assigned to it within the existing port. (Clause 2.23) For the first three years from the date of the agreement (Jan. 16, 1997), PPC retained the first option to accept or reject the operation of cargo handling at the Rodman Naval Station. (Clause 2.1) [Note: Admiral Thomas Moorer, former chairman of the Joint Chiefs of Staff, has publicly speculated that given China’s track record and interests, it’s likely to gain some operational control over parts of Howard Air Force Base, Galeta Island, Fort Sherman, SOUTHCOM Quarry Heights Headquarters, Ancon Hill, Amador or other abandoned military installations in the near future.]

Under the contract, PPC will perform significant and critical roles associated with running a Canal port such as handling all cargo (bulk and general), passengers, roll on-roll off, transportation, container cargo stations and any other facilities associated with the general operation. (See Preamble and Clause 2.10.)

Along with that right, PPC may exercise extensive and near sovereign control over the ports, including road construction, railroad construction, fixing and charging tariff rates, fees and payment “that it considers convenient” as well as establish the size and practice of the labor force. (See Clause 210e-w.) PPC also has the right to operate tug boats, work boats, a vessel repair service and piloting service. (See Clause 2.10c and Clause 2.12i-j.)

Most significantly, PPC has the right “to cede or transfer all or part of the rights and obligations arising from [this contract] or from the activities derived from said contract” to any third party, provided such third party makes the minimal effort of registering as a Panamanian corporation. (See Clause 2.8.)